The following statistics and estimates were compiled by Big Moon Bank regarding a proposed new branch office
Question:
Branch office expected return ............ = 15%
Standard deviation of branch return......... = 8%
Existing bank’s expected return .......... = 10%
Standard deviation of existing bank’s return..... = 5%
Branch asset value as a percentage of total bank assets .... = 16%
Correlation of net cash flows for branch and bank as a whole .. = +0.48
Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
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Related Book For
Bank Management and Financial Services
ISBN: 978-0078034671
9th edition
Authors: Peter Rose, Sylvia Hudgins
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